Colombia Best Bank: Banco Davivienda

Nov 1, 2012

Colombia¹s banks have been on a roll for the past two
years, but they face stiff competition from abroad. The
country¹s robust growth has buoyed the banking sector and
fuelled a diversification of banking activities and lending
­ a development not lost on foreign institutions eyeing the
market.

Canada¹s Scotia Bank bought control of Colpatria for $1
billion, and Chile¹s Corpbanca has taken Santander
Colombia for $1.23 billion and Helm Bank, if completed, for
$1.28 billion.

Though these moves make headlines, they are still far from
shaking up the regional pecking order, where Bancolombia and
Banco de Bogotá sit on the top. Colombia¹s Banco
Davivienda, the system¹s third-largest has been steadily
growing to diversify its lending away from mortgages, under the
watch of its president, Efrain Ferero.

The bank has now has become a regional player following its
agreement this year to acquire HSBC¹s operations in El
Salvador, Honduras and Costa Rica for $801 million ­ a
change in strategy that reflects a strengthening of its
position at home. ³This acquisition was a surprise because
they¹ve never gone outside the country,² says Felipe
Carvallo, an analyst at Moody¹s.

A diversified bank with a 50% commercial lending footprint
and the rest split between mortgage and consumer products.
Banco Davivienda has evolved since the 1990s from being a
mortgage finance company, to achieve a balance sheet for which
corporate lending has become increasingly important.

Commercial and mortgage loans have played a large role in
recent portfolio growth, with the net portfolio at $25.9
trillion pesos ($14.4 billion), up 18.2% from the year
before.

Net income for the first quarter of 2012 was $215 billion
pesos, up 9.9% compared to the fourth quarter last year and
25.5% versus the same quarter in 2011. Its SME segment also
grew 24% compared to the year before. Its housing portfolio
grew some 23% to $4.4 trillion pesos, inclusive of housing
leasing.

Davivienda will need to maintain its growth in diverse
business areas to keep pace with both foreign and domestic
competitors.

As with other large Colombian banks, Davivienda enjoys
diverse access to funding. While local mortgage securitization
is part of its way of life, Davivienda tapped the international
bond markets for the first time this June. Its $500 million
2022 issue attracted some six times demand. The sale followed a
$400 billion peso subordinated domestic bond issuance, and was
preceded by a $500 million peso domestic sale.
LF

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